81 FR 7848 - Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 21.16, Risk Monitor Mechanism, Relating to the EDGX Equity Options Trading Platform
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 30 (February 16, 2016)
Federal Register Volume 81, Issue 30 (February 16, 2016)
| Page Range | 7848-7851 | |
| FR Document | 2016-02984 |
[Federal Register Volume 81, Number 30 (Tuesday, February 16, 2016)] [Notices] [Pages 7848-7851] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-02984] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77091; File No. SR-EDGX-2016-02] Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 21.16, Risk Monitor Mechanism, Relating to the EDGX Equity Options Trading Platform February 9, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on January 27, 2016, EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated this proposal as a ``non-controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b- 4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ 15 U.S.C. 78s(b)(3)(A). \4\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend Rule 21.16, entitled ``Risk Monitor Mechanism'', in order to modify the risk monitoring functionality offered to all Users \5\ of the EDGX equity options trading platform (``EDGX Options''). --------------------------------------------------------------------------- \5\ As defined in Exchange Rule 16.1(a)(63), a User is any Exchange member or sponsored participant authorized to obtain access to the Exchange. --------------------------------------------------------------------------- The text of the proposed rule change is available at the Exchange's Web site at www.batstrading.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. (A) Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend Exchange Rule 21.16 to modify the method by which the BZX Options Risk Monitor Mechanism measures risk and to modify the ability of a User to reset the Risk Monitor Mechanism when risk has been triggered in the Firm Category, as described below. Background Currently, the Exchange's Risk Monitor Mechanism operates by maintaining a counting program for each User. A User may configure a single counting program or multiple counting programs to govern its trading activity (i.e., on a port by port basis). The System engages the Risk Monitor Mechanism in a particular option when the counting program has determined that a User's trading has reached one of several specified triggers (``Specified Engagement Trigger'') established by such User during a specified time period or on an absolute basis. Elimination of Option Categories The current counting program counts executions in the following ``Option Categories'': Front-month puts, front-month calls, back-month puts, and back-month calls (each an ``Option Category'').\6\ The counting program also [[Page 7849]] counts a User's executions, contract volume and notional value across all options which a User trades (``Firm Category''). The Exchange proposes to eliminate the concept of the Option Category, such that the counting program will instead operate per option across all Option Categories (i.e., all front-month puts, front-month calls, back-month puts, and back-month calls). The Exchange does not propose to amend the Firm Category of the Risk Monitor Mechanism. --------------------------------------------------------------------------- \6\ For the purposes of Rule 21.16, a front-month put or call is an option that expires within the next two calendar months, including weeklies and other non-standard expirations, and a back- month put or call is an option that expires in any month more than two calendar months away from the current month. --------------------------------------------------------------------------- The Exchange believes that the change will result in a Risk Monitor Mechanism that is more consistent with that offered by other options exchanges. Although the Exchange implemented its Risk Monitor Mechanism with the concept of Option Categories for technical reasons, the Exchange is not aware of any other options exchange that uses the concept of Option Categories in the context of its risk mechanism. Calculation of Percentage-Based Engagement Trigger The Exchange currently offers a Specified Engagement Trigger to the Risk Monitor Mechanism based on percentage under Exchange Rule 21.16(b)(ii) (the ``percentage trigger''). The percentage trigger is triggered whenever a trade counter has calculated that the User has traded a set percentage within a set time period against the User's orders in a specified class. The set percentage is specified by the User (the ``Specified Percentage'') and is proposed to be calculated as follows (and as shown in the examples below): (1) A counting program would first calculate, for each series of an option class, the percentage of each User's orders or Market Maker's quotes that are executed on each side of the market; and (2) the counting program would then sum the overall series percentages for the entire option class to calculate the percentage trigger. The Exchange proposes to specify this methodology in Rule 21.16. As proposed, the Exchange would no longer aggregate all bids and offers in each series for purposes of counting the percentage trigger, as it currently does, but would instead count bids and offers in each series separately. For example, assume a User enters 100 contract orders at both the National Best Bid (``NBB'') and National Best Offer (``NBO'') in two series of a class, its Specified Percentage is 100%, and the four executions in the example below occur within the time period specified by the User. The counting program would calculate the percentage of quote risk mechanism as follows: -------------------------------------------------------------------------------------------------------------------------------------------------------- Aggregate Number of Number of Percentage of percentage of Event/Series Bid size contracts Offer size contracts quote of quote executed-- executed-- execution following bids offers execution -------------------------------------------------------------------------------------------------------------------------------------------------------- Quotes Entered: Series 1................................ 100 0 100 0 0 0 Quotes Entered: Series 2................................ 100 0 100 0 0 0 Sell order for 40 contracts: Series 1................... 100 40 100 0 40 40 Buy order for 50 contracts: Series 1.................... 60 0 100 50 50 90 Sell order for 5 contracts: Series 2.................... 100 5 100 0 5 95 Buy order for 10 contracts: Series 2.................... 95 0 100 10 10 105 -------------------------------------------------------------------------------------------------------------------------------------------------------- In this example, the aggregate percentages of the User's quotes on each side in all series during the time period is 105%,\7\ thus exceeding the specified percentage of 100%, at which point the percentage trigger would be triggered and the User's remaining orders in the appointed class would be cancelled. --------------------------------------------------------------------------- \7\ As set forth in the table and consistent with the methodology as proposed to be defined in Rule 21.16, the percentage trigger is calculated by individually calculating the percentage of each execution in each series on each of the bid and the offer and then summing each of these percentages together. The percentage, thus, does not calculate the actual percentage as a whole in the options class over the time period--in the example, 105 contracts out of 400 contracts were executed over the time period yet this does not result in a percentage calculation of 26.25%. Instead, 40% of the quoted bid in Series 1 is executed, then 50% of the quoted offer in Series 1 is executed, then 5% of the quoted bid in Series 2 is executed, and finally 10% of the quoted offer in Series 2 is executed. By summing these percentages, the percentage trigger equals 105%. As set forth elsewhere in the proposal, the Exchange believes that this counting methodology is similar to that offered by other options exchanges. --------------------------------------------------------------------------- Re-Setting of Risk Monitor Mechanism Under current Rule 21.16, when a Specified Engagement Trigger is reached in the Firm Category, the Risk Monitor Mechanism will automatically remove such User's orders in all series of all options and reject any additional orders from a User until the counting program has been reset in accordance with paragraph (d) of the rule. The Risk Monitor Mechanism will also attempt to cancel any orders that have been routed away to other options exchanges on behalf of the User. The Exchange proposes to further amend Rule 21.16 so that unless otherwise instructed by a User, in the event a Specified Engagement Trigger is reached in the Firm Category, the Exchange will not allow a User to automatically reset the counting program and Users will instead need to contact the Exchange to request a reset. Because reaching a Specified Engagement Trigger in the Firm Category should be a rare event, the Exchange believes that most Users will prefer to pause in the event of a trigger, review the circumstances, and then slowly re-enter the market. The Exchange is proposing to maintain the ability to automatically reset the counting program, however, because that is how the Risk Monitor Mechanism operates today and because it is possible that a User's risk management program is established in a way where the User would take the trigger into account but prefers the ability to automatically reset to control their re-entry to the market rather than needing to contact the Exchange. 2. Statutory Basis The rule change proposed in this submission is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b) of the Act.\8\ Specifically, the proposed change is consistent with Section 6(b)(5) of the Act,\9\ because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to, and perfect the mechanism of, a free and open market and a national market system. The Exchange believes that the proposal is appropriate and reasonable [[Page 7850]] because it offers additional functionality for Users to manage their risk. --------------------------------------------------------------------------- \8\ 15 U.S.C. 78f(b). \9\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- Modifying the Risk Monitor Mechanism to eliminate the Option Category concept will allow Users to manage their risk in each option class in a way that is more consistent with the way they manage risk on other option exchanges. As noted above, although the Exchange implemented its Risk Monitor Mechanism with the concept of Option Categories for technical reasons, the Exchange is not aware of any other options exchange that uses the concept of Option Categories in the context of its risk mechanism. Offering the percentage trigger without aggregation across the bid and the offer as part of the Risk Monitor Mechanism will provide Market Makers and other Users with greater control and flexibility with respect to managing risk and the manner in which they enter orders and quotes, which removes impediments to a free and open market and benefits all Users of BZX Options. The Exchange notes that similar functionality is offered by NYSE Arca, Inc. (``NYSE Arca Options'') and NYSE Amex Options, Inc. (``NYSE Amex Options'').\10\ --------------------------------------------------------------------------- \10\ See NYSE Arca Options Rule 6.40(d); see also NYSE Amex Options Rule 928NY(d). --------------------------------------------------------------------------- Finally, creating a default that prevents the automatic reset of the counting program in the event a Specified Engagement Trigger is reached in the Firm Category will provide additional controls to Users that are trying to manage their risk. At the same time, allowing Users to maintain the ability to automatically reset the counting program will maintain the status quo with respect to the current Risk Monitor Mechanism and will allow Users to tailor their risk management programs as appropriate to their operations. The Exchange believes that this change is a modest extension of the current rule, that it is consistent with the overall purpose of the rule (i.e., to mitigate risk), and that it does not raise any policy issues particularly because a User can still optionally use the same functionality offered today by informing the Exchange that it still wishes to utilize the feature to automatically reset the counting program even if a Specified Engagement Trigger has been reached in the Firm Category. (B) Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the act. To the contrary, the proposed changes to the Exchange's Risk Monitor Mechanism will generally make the Exchange's offering more consistent with that offered by other exchanges. Thus, the proposed rule change will promote competition because it will allow the Exchange to offer its Users similar features as are available at other exchanges and thus further compete with other exchanges for order flow. (C) Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (A) Significantly affect the protection of investors or the public interest; (B) impose any significant burden on competition; and (C) by its terms, become operative for 30 days from the date on which it was filed or such shorter time as the Commission may designate it has become effective pursuant to Section 19(b)(3)(A) of the Act \11\ and paragraph (f)(6) of Rule 19b-4 thereunder,\12\ the Exchange has designated this rule filing as non-controversial. The Exchange has given the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. --------------------------------------------------------------------------- \11\ 15 U.S.C. 78s(b)(3)(A). \12\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative prior to 30 days after the date of filing. Rule 19b-4(f)(6)(iii), however, permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the noted operative delay so that the Exchange may implement the proposal on or about February 8, 2016, when the Exchange anticipates that the features will be available. The Exchange has stated that such a waiver would, without undue delay, provide its Users with a risk mechanism that is more similar to that offered by other options exchanges and that may assist its Users in providing liquidity on the Exchange consistent with their risk profile. The Commission believes that waiving the thirty day delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the thirty-day operative delay.\13\ --------------------------------------------------------------------------- \13\ For purposes of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (1)Necessary or appropriate in the public interest; (2) for the protection of investors; or (3) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File No. SR-EDGX-2016-02 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File No. SR-EDGX-2016-02. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the [[Page 7851]] public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-EDGX-2016-02 and should be submitted on or before March 8, 2016. --------------------------------------------------------------------------- \14\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\14\ Brent J. Fields, Secretary. [FR Doc. 2016-02984 Filed 2-12-16; 8:45 am] BILLING CODE 8011-01-P
![7848 Federal Register / Vol. 81, No. 30 / Tuesday, February 16, 2016 / Notices
automated, electronic, mechanical, or other Affected Public: Individuals The text of the proposed rule change
technological collection techniques or other submitting Privacy Act record requests is available at the Exchange’s Web site
forms of information technology, e.g., for completed Standard Form SF85/ at www.batstrading.com, at the
permitting electronic submissions of SF85P/SF86 to FIS–FOI/PA. principal office of the Exchange, and at
responses.
Number of Respondents: 15,682. the Commission’s Public Reference
DATES: Comments are encouraged and Estimated Time per Respondent: 5 Room.
will be accepted until April 18, 2016. minutes.
This process is conducted in accordance II. Self-Regulatory Organization’s
Total Burden Hours: 1,307.
with 5 CFR 1320.8(d). Statement of the Purpose of, and
U.S. Office of Personnel Management. Statutory Basis for, the Proposed Rule
ADDRESSES: Interested persons are Beth F. Cobert, Change
invited to submit written comments on
Acting Director.
the proposed information collection to In its filing with the Commission, the
[FR Doc. 2016–03125 Filed 2–12–16; 8:45 am] Exchange included statements
the Federal Investigative Services, U.S.
Office of Personnel Management, 1900 E BILLING CODE 6325–53–P concerning the purpose of and basis for
Street NW., Washington, DC 20415, the proposed rule change and discussed
Attention: Donna McLeod or by any comments it received on the
electronic mail at FISFormsComments@ SECURITIES AND EXCHANGE proposed rule change. The text of these
opm.gov. COMMISSION statements may be examined at the
FOR FURTHER INFORMATION CONTACT: A places specified in Item IV below. The
[Release No. 34–77091; File No. SR–EDGX– Exchange has prepared summaries, set
copy of this information collection, with 2016–02]
applicable supporting documentation, forth in Sections A, B, and C below, of
may be obtained by contacting Federal Self-Regulatory Organizations; EDGX the most significant parts of such
Investigative Services, U.S. Office of Exchange, Inc.; Notice of Filing and statements.
Personnel Management, 1900 E Street Immediate Effectiveness of a Proposed (A) Self-Regulatory Organization’s
NW., Washington, DC 20415, Attention: Rule Change To Amend Rule 21.16, Statement of the Purpose of, and
Donna McLeod or by electronic mail at Risk Monitor Mechanism, Relating to Statutory Basis for, the Proposed Rule
FISFormsComments@opm.gov. the EDGX Equity Options Trading Change
SUPPLEMENTARY INFORMATION: The Platform
1. Purpose
Privacy Act Request for Completed
February 9, 2016. The purpose of the proposed rule
Standard Form SF85/SF85P/SF86, INV
100A, is an information collection Pursuant to Section 19(b)(1) of the change is to amend Exchange Rule 21.16
completed by individuals seeking access Securities Exchange Act of 1934 (the to modify the method by which the BZX
their most recently completed SF85, ‘‘Act’’),1 and Rule 19b–4 thereunder,2 Options Risk Monitor Mechanism
SF85P, or SF86 that was used to initiate notice is hereby given that on January measures risk and to modify the ability
a background investigation performed 27, 2016, EDGX Exchange, Inc. (the of a User to reset the Risk Monitor
by the Office of Personnel Management ‘‘Exchange’’ or ‘‘EDGX’’) filed with the Mechanism when risk has been
(OPM), Federal Investigative Services Securities and Exchange Commission triggered in the Firm Category, as
(FIS). OPM FIS’s Freedom of (‘‘Commission’’) the proposed rule described below.
Information and Privacy Act (FOI/PA) change as described in Items I and II
below, which Items have been prepared Background
office utilizes the optional form INV
100A to standardize the collection of by the Exchange. The Exchange has Currently, the Exchange’s Risk
data elements specific to Privacy Act designated this proposal as a ‘‘non- Monitor Mechanism operates by
record requests for previously controversial’’ proposed rule change maintaining a counting program for
completed standard forms only. Current pursuant to Section 19(b)(3)(A) of the each User. A User may configure a
Privacy Act record requests are Act 3 and Rule 19b–4(f)(6)(iii) single counting program or multiple
submitted to FIS–FOI/PA in a format thereunder,4 which renders it effective counting programs to govern its trading
chosen by the requester. Often the upon filing with the Commission. The activity (i.e., on a port by port basis).
requests are missing data elements Commission is publishing this notice to The System engages the Risk Monitor
which require contact with the solicit comments on the proposed rule Mechanism in a particular option when
requester, thereby adding processing change from interested persons. the counting program has determined
time. Standardization of the data I. Self-Regulatory Organization’s that a User’s trading has reached one of
elements collected can assist with Statement of the Terms of Substance of several specified triggers (‘‘Specified
providing timely responses and FIS– the Proposed Rule Change Engagement Trigger’’) established by
FOI/PA being able to verify the identity such User during a specified time
The Exchange filed a proposal to period or on an absolute basis.
of the requester thereby ensuring
amend Rule 21.16, entitled ‘‘Risk
Privacy Act Protected records are not Elimination of Option Categories
Monitor Mechanism’’, in order to
inappropriately released to third parties.
modify the risk monitoring functionality The current counting program counts
OPM proposes no changes to the
offered to all Users 5 of the EDGX equity executions in the following ‘‘Option
form.
options trading platform (‘‘EDGX Categories’’: Front-month puts, front-
Analysis Options’’). month calls, back-month puts, and back-
mstockstill on DSK4VPTVN1PROD with NOTICES
Agency: Federal Investigative month calls (each an ‘‘Option
Services, U.S. Office of Personnel 1 15 U.S.C. 78s(b)(1). Category’’).6 The counting program also
2 17 CFR 240.19b–4.
Management. 3 15 U.S.C. 78s(b)(3)(A). 6 For the purposes of Rule 21.16, a front-month
Title: Privacy Act Request for 4 17 CFR 240.19b–4(f)(6)(iii).
put or call is an option that expires within the next
Completed Standard Form SF85/SF85P/ 5 As defined in Exchange Rule 16.1(a)(63), a User two calendar months, including weeklies and other
SF86, INV 100A. is any Exchange member or sponsored participant non-standard expirations, and a back-month put or
OMB Number: 3206–0266. authorized to obtain access to the Exchange. call is an option that expires in any month more
VerDate Sep<11>2014 22:15 Feb 12, 2016 Jkt 238001 PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 E:\FR\FM\16FEN1.SGM 16FEN1](https://thefederalregister.org/doc/81_FR_7878/page/1.svg)
![Federal Register / Vol. 81, No. 30 / Tuesday, February 16, 2016 / Notices 7851
public in accordance with the solicit comments on the proposed rule Engagement Trigger’’) established by
provisions of 5 U.S.C. 552, will be change from interested persons. such User during a specified time
available for Web site viewing and period or on an absolute basis.
I. Self-Regulatory Organization’s
printing in the Commission’s Public
Statement of the Terms of Substance of Elimination of Option Categories
Reference Room, 100 F Street NE.,
the Proposed Rule Change The current counting program counts
Washington, DC 20549, on official
business days between the hours of The Exchange filed a proposal to executions in the following ‘‘Option
10:00 a.m. and 3:00 p.m. Copies of such amend Rule 21.16, entitled ‘‘Risk Categories’’: front-month puts, front-
filing will also be available for Monitor Mechanism’’, in order to month calls, back-month puts, and back-
inspection and copying at the principal modify the risk monitoring functionality month calls (each an ‘‘Option
office of the Exchange. All comments offered to all Users 5 of the BATS equity Category’’).6 The counting program also
received will be posted without change; options trading platform (‘‘BZX counts a User’s executions, contract
the Commission does not edit personal Options’’). volume and notional value across all
identifying information from The text of the proposed rule change options which a User trades (‘‘Firm
submissions. You should submit only is available at the Exchange’s Web site Category’’). The Exchange proposes to
information that you wish to make at www.batstrading.com, at the eliminate the concept of the Option
available publicly. All submissions principal office of the Exchange, and at Category, such that the counting
should refer to File No. SR–EDGX– the Commission’s Public Reference program will instead operate per option
2016–02 and should be submitted on or Room. across all Option Categories (i.e., all
before March 8, 2016. front-month puts, front-month calls,
II. Self-Regulatory Organization’s
back-month puts, and back-month
For the Commission, by the Division of Statement of the Purpose of, and
calls). The Exchange does not propose
Trading and Markets, pursuant to delegated Statutory Basis for, the Proposed Rule
to amend the Firm Category of the Risk
authority.14 Change
Monitor Mechanism.
Brent J. Fields, In its filing with the Commission, the The Exchange believes that the
Secretary. Exchange included statements change will result in a Risk Monitor
[FR Doc. 2016–02984 Filed 2–12–16; 8:45 am] concerning the purpose of and basis for Mechanism that is more consistent with
BILLING CODE 8011–01–P the proposed rule change and discussed that offered by other options exchanges.
any comments it received on the Although the Exchange implemented its
proposed rule change. The text of these Risk Monitor Mechanism with the
SECURITIES AND EXCHANGE statements may be examined at the concept of Option Categories for
COMMISSION places specified in Item IV below. The technical reasons, the Exchange is not
Exchange has prepared summaries, set aware of any other options exchange
[Release No. 34–77090; File No. SR–BATS– forth in Sections A, B, and C below, of that uses the concept of Option
2016–06] the most significant parts of such Categories in the context of its risk
statements. mechanism.
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and (A) Self-Regulatory Organization’s Calculation of Percentage-Based
Immediate Effectiveness of a Proposed Statement of the Purpose of, and Engagement Trigger
Rule Change To Amend Rule 21.16, Statutory Basis for, the Proposed Rule The Exchange currently offers a
Risk Monitor Mechanism, Relating to Change Specified Engagement Trigger to the
the BATS Equity Options Trading 1. Purpose Risk Monitor Mechanism based on
Platform The purpose of the proposed rule percentage under Exchange Rule
change is to amend Exchange Rule 21.16 21.16(b)(ii) (the ‘‘percentage trigger’’).
February 9, 2016. The percentage trigger is triggered
to modify the method by which the BZX
Pursuant to Section 19(b)(1) of the Options Risk Monitor Mechanism whenever a trade counter has calculated
Securities Exchange Act of 1934 (the measures risk and to modify the ability that the User has traded a set percentage
‘‘Act’’),1 and Rule 19b–4 thereunder,2 of a User to reset the Risk Monitor within a set time period against the
notice is hereby given that on January Mechanism when risk has been User’s orders in a specified class. The
27, 2016, BATS Exchange, Inc. (the triggered in the Firm Category, as set percentage is specified by the User
‘‘Exchange’’ or ‘‘BATS’’) filed with the described below. (the ‘‘Specified Percentage’’) and is
Securities and Exchange Commission proposed to be calculated as follows
(‘‘Commission’’) the proposed rule Background (and as shown in the examples below):
change as described in Items I and II Currently, the Exchange’s Risk (1) A counting program would first
below, which Items have been prepared Monitor Mechanism operates by calculate, for each series of an option
by the Exchange. The Exchange has maintaining a counting program for class, the percentage of each User’s
designated this proposal as a ‘‘non- each User. A User may configure a orders or Market Maker’s quotes that are
controversial’’ proposed rule change single counting program or multiple executed on each side of the market,
pursuant to Section 19(b)(3)(A) of the counting programs to govern its trading including both displayed and non-
Act 3 and Rule 19b–4(f)(6)(iii) activity (i.e., on a port by port basis). displayed size; and (2) the counting
thereunder,4 which renders it effective The System engages the Risk Monitor program would then sum the overall
mstockstill on DSK4VPTVN1PROD with NOTICES
upon filing with the Commission. The Mechanism in a particular option when series percentages for the entire option
Commission is publishing this notice to the counting program has determined
6 For the purposes of Rule 21.16, a front-month
that a User’s trading has reached one of
put or call is an option that expires within the next
14 17 CFR 200.30–3(a)(12). several specified triggers (‘‘Specified two calendar months, including weeklies and other
1 15 U.S.C. 78s(b)(1).
non-standard expirations, and a back-month put or
2 17 CFR 240.19b–4. 5 As defined in Exchange Rule 16.1(a)(63), a User call is an option that expires in any month more
3 15 U.S.C. 78s(b)(3)(A).
is any Exchange member or sponsored participant than two calendar months away from the current
4 17 CFR 240.19b–4(f)(6)(iii). authorized to obtain access to the Exchange. month.
VerDate Sep<11>2014 22:15 Feb 12, 2016 Jkt 238001 PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 E:\FR\FM\16FEN1.SGM 16FEN1](https://thefederalregister.org/doc/81_FR_7878/page/4.svg)
Document Created: 2016-02-13 03:13:17
Document Modified: 2016-02-13 03:13:17
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 7848 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR